PayNet says capex lending still falling
CHICAGO (Reuters) - A firm that tracks trends in the U.S. commercial lending market said on Monday that demand for loans, leases and lines of credit to finance capital equipment investment was still falling, suggesting the end to the current downturn is nowhere in sight.
Speaking at the Reuters Manufacturing Summit in Chicago, Bill Phelan, the president and founder of PayNet Inc, said capex loan demand as measured by loan originations fell 23 percent in January and was on track to be down between 15 and 20 percent in February.
While that is less than the 34 percent drop in October that marked the most dramatic year-over-year retreat in commercial lending so far, Phelan said the continuing drop in originations, as well as a steady rise in both moderate and severe delinquencies, suggested "we're still at the early stages of this business credit cycle."
More the half the money invested in plants, equipment and software in the United States in any given year is financed with loans, leases and lines of credit.
PayNet, based in Skokie, Illinois, collects real-time loan information -- such as originations and delinquencies -- from more than 200 leading U.S. capex lenders.
The company's proprietary database -- updated weekly -- is one of the richest and largest collections of commercial loans and leases, encompassing more than 90 million current and historic contracts worth more than $600 billion.
Phelan said that while delinquency rates through January 2009 were still below the levels seen during the country's last major recession between 2001 and 2002, they were likely to go much higher.
He said moderate delinquencies -- accounts behind 31 days or less -- are currently at 4.14 percent but could ultimately hit 8 to 10 percent in this cycle, up from a high of 7 percent in 2002.
He said that government efforts to increase liquidity, including the Term Asset-Backed Securities Loan Facility (TALF) and Troubled Asset Relief Program (TARP), had triggered a burst of renewed lending by commercial banks.
"I think there's a redistribution of where that demand (for loans) is going," Phelan said. "I think it's difficult for some of these captive finance businesses that don't qualify for TALF or TARF money. They're retaining their cash to ride through this tough time and are pulling back and clamping down on approval rates. ... So what we're seeing is that banks have seen an increase in demand versus some of the captives."
(Reporting by James Kelleher, editing by Matthew Lewis)
